Homeowners face paying extra for rubbish collection

A long-awaited review of local government finance ordered by the Government said town halls must be given the right to charge for every bag of non-recyclable rubbish people leave out.

It also outlined plans for five new council tax bands for the most valuable properties that would mean anyone with a house worth more than £545,000 paying more.

In the longer term, the report said ministers should consider replacing council tax with a new local income tax that would see 7.7 pence in every pound earned going to town halls.

The Treasury has ruled out any major changes to council tax in the remainder of this Parliament.

But the Conservatives said the report showed Labour was planning a "tax con" in which people would "pay more and get nothing" if it won the next election.

And new rubbish taxes could be introduced sooner than that.

Former civil servant Sir Michael Lyons, who has spent almost three years examining local government finance, said local authorities would soon face massive fines if they failed to reduce the amount of waste going to landfill.

"We need to put local communities in a position where they have the power to change local behaviour, to encourage people to recycle, to compost, to reduce the amount of packaging that they purchase," he said.

A new "charging regime" would act as a "powerful incentive" on householders to change their habits.

Rubbish taxes would be fairer because they heaviest waste producers would have to pay most, he added.

His report said local authorities should be free to introduce whatever extra charges they see fit. But if rates were similar to those adopted in similar schemes in Europe, fees for non-recyclable waste could be between 25p and 50p a kilo.

For the average household, that could work out at around £10 a month or £120 a year.

On council tax, Sir Michael said ministers were wrong to put off a nationwide revaluation of homes to calculate bills.

The Government has said the exercise will not take place until after the next election.

But Sir Michael said it must go ahead soon after that - and called for further revaluations to take place at intervals of no more than five years.

He insisted: "It's about fairness as a property tax. Those whose properties have become more expensive should properly under a property tax pay more, and those whose properties have become less expensive should pay less."

Around four million properties could be pushed up into a higher council tax band by a revaluation - with those in London and the South East, where property prices have risen most, bearing the brunt. Some 3.7 million, in areas where prices have not risen as fast, would go down a band.

The report also proposes changes to council tax bands.

There are currently eight, with owners in band H paying twice as much as people in band D.

Band A owners, in the least valuable properties, are charged two-thirds of the band D rate.

The existing bands are based on property valuations last carried out in 1991.

Under Sir Michael's proposed changes to council tax bands, anyone with a house worth more than £545,000 would face increases in annual bills. There are around 464,000 homes that would be affected, most in London and the South East.

Band G would be split into two new bands and Band H into three.

Those with homes worth between £545,000 and £810,000 would see average bills rise from £2,100 to £2,380 a year; homes between £810,000 and £1.5m would pay £2,990; between £1.5m and £2.5m would pay £3,840; and those worth more than £2.5m would pay £5,120.

Central government should also give up its power to cap council tax increases, allowing local authorities to impose whatever rises they liked each year, the report said.

And anyone entitled to council tax benefit should get it automatically as a rebate, instead of having to claim it.

The latest figures, released last year, showed that almost half of pensioners are failing to claim the benefit.

An estimated £1.8 billion is going unclaimed each year across the UK and some people could be owed as much as £600.

Controversially, the report also said town halls should be able to encourage pensioners to "defer" their local tax bills - and instead pay with interest when their property is sold or when they die.

It also floated a controversial new tourist or "bed tax" as an extra source of town hall income, though it would be up to councils whether they impose one or not.

It could be levied by councils on England's 16,000 hotels, hostels and bed and breakfasts.

Industry experts estimate a bed tax of ten per cent would add about £100 to a family of four's holiday in Britain.

The report rejected demands from town halls for the restoration of their power to set and collect the business rate - currently fixed nationally and linked to inflation.

The business community did not trust town halls to set the rate fairly, Sir Michael said.

But he angered business leaders by recommending that councils should be given the power to impose a "supplementary" business rate to fund local improvements.

"I fear the elderly, struggling with soaring council tax bills, will be pressured into signing away their homes to the taxman.

"Every household faces the prospect of new rubbish taxes on top, combined with their bins only being collected once a fortnight.

"To top the lot, families wanting to go green and holiday in this country will be punished with new bed taxes, fatally undermining Britain’s struggling tourist resorts.

"Higher taxes are on the way from your town hall - engineered by Labour - without any improvements in local services.

"This is a tax con - pay more and get nothing."

Blair Gibbs, of the TaxPayers' Alliance campaign group, said: "This gives the green light to profligate councils to spend and waste even more of our money by raising council taxes and introducing a raft of new ones."